Key GST changes that helps in ease of doing business: Industry expects that the impact of Covid-19 Pandemic certainly going to be longer and that demands the Government to relax GST norms. The industry is expecting simplification of reconciliation to help the small vendors because many of them are unable to file returns. The industry also wants the government to offer input credit for the products they purchased under Corporate Social Responsibility. More importantly, GST Refunds. Litigation can be avoided on the refunds if the input that the business is using in their process relate to the output.
Key GST changes that helps in ease of doing business
While there is already a deferment, but further deferment will help the industry with the much-needed time to understand compliance on
- New GST returns and E-invoicing deferment giving time till 31 March 2021
- GST audit and issuing fresh assessments and audit notices to either deferred further or go slow on this matter.
- The process of reconciliation between what has been recorded as purchases and what the vendor has offered needs to be simplified and defer that process for a few months. This is due to reconciliation is a big challenge for the industry because a lot of vendors, particularly smaller vendors, owing to liquidity crunch either have not been able to pay taxes or they have not been able to file the returns etc.
- In terms of legislative changes,, clarity required whether Industry will get the Input Credit (ITC) for items that was purchased and used for CSR purposes. A lot of companies are doing phenomenal work in the Covid-19 situation where they have reached out to people and helped them out. But to encourage them to do more, the Government should come up with the clarification saying that whatever you are using for CSR purposes you will get input credit without much string attached to this.
- Restriction today on input credit, for certain expenses like insurance which were incurring for employees and you don’t get input credit (ITC) because it’s specifically denied. Due to covid-19 Pandemic, insurance cover is getting increased and hence to allow the credit for expenses making to employees
- For inverted duty structure, to facilitate refund for taxes paid on inputs where the rate of taxes on input is higher. For example, if Assesses buying inputs at 18 per cent and correspond output (finished products) is at 5 per cent then we get a refund, but refund is limited to taxes paid on inputs, not input services.
- Making an expenditure for advertising or other services, refund to be allowed.
- These measures if taken into consideration by the Government shall provide some relief to the businesses. Following are the additional areas that Government can help the industry
- Process of advance ruling. The government has the process but it’s not working fine because different states on the same issue are taking contrary positions. The government has tried to resolve this, but the measures have not been implemented yet. For the businesses, when the law is not clear, they are not sure what to do either there would be a negative ruling without too much of detailed analysis or they are getting contrary rulings which is a structural issue. The litigation can be avoided is clearly on the refunds whether input being used is really connected with the output. Further, issue of holding and subsidiary companies, need to resolve refund related issues.
- Indian GST law is slightly complex as far as provisions are concerned relating to Input Tax Credit (ITC) in terms of what is entitled and what is not entitled. It is advisable to follow what other countries did it successfully to permit everything which business is using is allowed as a credit, except for personal expenses. Currently there are lot of restrictions, to quote an instance, if one construct a factory whatever tax paid to the contractor is not allowed to offset.
Tax structure rates
- The tax structure rates to be aligned to compress the number of Slabs from 12% or 18 % to a single rate of 15% which could be a quick fix to this issue. Few Industry sectors which are not currently in GST, their exclusion is also leading to a lot of litigation. For example, petroleum sector, on passenger fuels it is difficult for the government to take a decision, instead Government to start with ATF and Natural gas by covering them under GST.
- It is quite ironical, if the vendor raises the invoice for Rs. 100 with 18% of GST and as a purchaser have paid him Rs. 118 fully, then whether Vendor has paid GST to the government or not, why should Purchaser be made responsible to owe for that. If seller, has not paid GST, the government should proceed against him and not deny Purchaser, the benefit of the Rs.18. In view of Government is not willing to accept this, lead to a lot of litigation has come up already and will come up in the future because of the reconciliation requirement. There is some bit of structural thinking that will be required so that this sort of anomaly can be easily resolved.
- Three years down the line, there remains the trepidation among the taxpayers about the cumbersome return filing, input credit reconciliation, technical glitches on the GSTN portal, peculiar rulings from the Advance Ruling Authorities (A Paratha is not a Roti or Popcorn is Prepared Food!!) to name a few. These are some of the many speed breakers that continue to plague this ‘unified’ tax system and that need a proactive radical thinking by the Government for early solution so that Industry facilitated with ease of compliance
- Faceless assessment to be implemented fully aligning to Globally Assessments, are happening by giving access to IT system of Assesses to complete audits online by Assessing Officer . Formation of a e-audit group to work out modalities as to how such audit to happen in the future, hopefully, the guidance will come soon.
While Industry by and large, happy with the progress which the government has made over the last two months and in the next couple of months, one can expect some concrete shape that the whole audit & assessment will take place with lot of desired flexibility for a transparent compliance.